Proposal 4: Approval of Amendment and Restatement of the 2006 Equity Incentive Plan
The Board of Directors is requesting that stockholders vote in favor of amending and restating the 2006 Equity Incentive Plan (2006 EIP), which would extend the 2006 EIP for an additional two years, among other changes described below. Since the 2006 EIP was first adopted in 2006, it has been our stated policy and practice to present it to stockholders for re-approval at least every two years. This allows stockholders to regularly and frequently review our use of equity compensation and to vote upon the continued use of the 2006 EIP. If this Proposal is approved, the term of the 2006 EIP will extend to 2020; if not approved, the 2006 EIP will terminate in 2018.
Intel has a long-standing practice of granting equity awards not only to its executives and directors but also broadly among its employees. In 2016, approximately 84% of Intel’s employees received an equity award. The 2006 EIP authorizes us to grant four types of equity awards—stock options, stock appreciation rights (SARs), restricted stock and restricted stock units. In practice, we have used the 2006 EIP to grant time-based restricted stock units (RSUs), performance-based restricted stock units which we call “OSUs,” and stock options.
The 2006 EIP is the sole active plan for granting equity awards to eligible employees and non-employee directors. The Board believes that our 2006 EIP is in the best interest of stockholders and Intel, as equity awards granted under the plan help to attract, motivate, and retain talented employees and non-employee directors; align employee and stockholder interests; link employee compensation to company performance; and maintain a culture based on employee stock ownership.
Please note that the following summary of major features of the amended and restated 2006 EIP is qualified in its entirety by reference to the actual text of the amended and restated 2006 EIP, which is included as Exhibit A to this proxy statement.
We are requesting that stockholders approve the amended and restated 2006 EIP, which includes approval of the following:
Extension of the Expiration Date of the 2006 Equity Incentive Plan to June 30, 2020. The 2006 EIP is currently scheduled to expire on June 30, 2018, and we are requesting an extension of the expiration of the plan to June 30, 2020. This extension is consistent with our biennial renewal cycle, which gives our stockholders the ability to evaluate and vote on the continuation of our plan on a frequent basis. Stockholder approval of the amendment and restatement of the 2006 EIP will also constitute re-approval of the material terms of the 2006 EIP’s performance goals for purposes of Section 162(m) of the tax code. We may use these performance goals to grant awards intended to qualify for the performance-based compensation exception of Section 162(m) (discussed below), but the 2006 EIP does not require us to do so.
Addition of 33 Million Shares to Fund the 2006 Equity Incentive Plan through June 2020. The Board requests the addition of 33 million shares to the 2006 EIP. These 33 million shares represent 0.7% of our outstanding shares of common stock as of December 31, 2016. We carefully manage share usage under the 2006 EIP – over the last three fiscal years, our annual gross burn rate has averaged 1.1%. In 2016, we granted equity awards covering 53.1 million shares. If approved, we expect this additional share request would allow us to maintain our regular equity compensation programs without interruption to the end of the extended 2006 EIP’s term in June 2020.
Prohibition on Paying Dividends Prior to Vesting. Under the 2006 EIP, equity awards will generally not earn or accrue dividends or dividend equivalents prior to vesting, unless specified by the Compensation Committee. If the committee does specify that an award will earn or accrue dividends or dividend equivalents, the amended and restated 2006 EIP would prohibit payment of those amounts prior to the award vesting. The dividends or dividend equivalents would be subject to the same restrictions and risk of forfeiture as the award itself. Although we do not pay dividends or dividend equivalents prior to vesting for any of our outstanding awards, we are recommending this explicit prohibition as a matter of good corporate governance.
French Tax-Qualified RSUs. In France, a tax law (Loi Macron) enacted in August 2015 introduced new requirements for the grant of French tax-qualified RSUs. French tax-qualified RSUs can provide more favorable income tax and social tax treatment to both French subsidiaries and their employees than non-qualified RSUs, but they must be granted under a plan that has been approved by stockholders after the Loi Macron became effective (in addition to other conditions). We are not proposing any changes in the amended and restated 2006 EIP in order to grant French tax-qualified RSUs. The 2006 EIP already authorizes the Compensation Committee to adopt rules and regulations as necessary to comply with applicable law, including sub-plans to comply with French tax-qualified RSU requirements. However, because stockholders have not approved the 2006 EIP since May 2015, stockholder approval of this Proposal would enable us to satisfy this requirement and to grant French tax-qualified RSUs under the Loi Macron.
The following table summarizes the number of shares that would be authorized for issuance after December 31, 2016 under our 2006 EIP, if this Proposal is approved.
2006 EIP Share Reservation
1 OSUs are granted at a target share amount, and can convert into Intel shares anywhere from 0% to 200% of that target amount upon vesting, depending on Intel’s total stockholder return performance relative to a comparison group of companies. This number assumes that OSUs outstanding as of December 31, 2016 will convert at 100% of their target amounts upon vesting. For more information on OSUs, see “Executive Compensation; Grants of Plan-Based Awards in Fiscal Year 2016.”
2 This is the additional amount of shares that would be issued if OSUs outstanding as of December 31, 2016 convert at 200% of their target amounts upon vesting.
3 Assumes OSUs outstanding as of December 31, 2016 vest at maximum payout levels.
4 If this Proposal is approved, an estimated 242.8 million shares would be available for new grants under the 2006 EIP. That number is an estimate because the shares available may increase due to cancellations and expirations and decrease due to new grants between December 31, 2016 and the effective date of the 2006 EIP amendment and restatement.
IMPORTANT GOVERNANCE FEATURES AND PRACTICES
The amended and restated 2006 EIP and our equity compensation programs are designed to reflect leading corporate governance practices:
|No Liberal Share Recycling||Shares used to pay the exercise price or withholding taxes for an outstanding award, unissued shares resulting from the net settlement of outstanding SARs, and shares purchased by Intel in the open market using the proceeds of option exercises do not become available for issuance as future awards.|
|No Evergreen Provision||The 2006 EIP does not contain an “evergreen” feature that automatically replenishes the shares available for future grants under the plan.|
|No Automatic Grants||The 2006 EIP does not provide for automatic grants to any participant.|
|No Tax Gross-Ups||The 2006 EIP does not provide for any tax gross-ups.|
|No Discounted Options or SARs||Stock options and SARs may not be granted with exercise prices lower than the market value of the underlying shares on the grant date.|
|No Repricing without Stockholder Approval||Other than in connection with a change in Intel’s capitalization, the purchase price of a stock option or SAR may not be reduced without stockholder approval, and underwater options and SARs may not be exchanged, or canceled and re-granted, for awards with a lower exercise price or for cash without stockholder approval.|
|No Reload Grants||Reload grants, or the granting of stock options conditioned upon delivery of shares to satisfy the exercise price and/or tax withholding obligation under another employee stock option, are not permitted.|
|Claw-Back||If the Compensation Committee determines that a participant committed an act of misconduct specified in the 2006 EIP, his or her unvested RSUs (including OSUs) and restricted stock will be canceled and none of his or her options and SARs will be exercisable. If the participant is an executive officer and the Compensation Committee determines that the act of misconduct contributed to a financial restatement, the participant may also be required to repay to Intel certain proceeds from his or her sales of Intel shares. See “Claw-Back Provision for Executive Officers” below.|
|Individual Limits on Awards||The 2006 EIP limits the number of shares underlying awards that may be granted to a participant in a calendar year. There are further limits on the number that may be granted to a non-employee director.|
|Minimum Performance Period||Any performance-based RSU or restricted stock award must be based on performance over a period of one year or longer. Our OSUs have a performance period of three years, which we believe promotes the creation of long-term value. Our senior-level employees receive a majority of their equity compensation, by grant date fair value, in OSUs.|
|Two-Year Plan Term||Since the adoption of the 2006 EIP, our practice has been to set a two-year term for the plan. This requires us to regularly and frequently present the 2006 EIP to stockholders for re-approval and extension.|
|Independent Administration||The 2006 EIP is administered by the Compensation Committee, which is composed entirely of “independent directors” within the meaning of NASDAQ independence requirements, “nonemployee directors” as defined in Rule 16b-3 under the Exchange Act, and “outside directors” as defined in Section 162(m) of the tax code.|
BACKGROUND ON EQUITY COMPENSATION AT INTEL
Intel granted equity awards to approximately 84% of its employees in 2016 and generally grants awards to more than 80% of employees in any one year. While we grant equity awards on a pre-established quarterly schedule, we grant most of our awards in the second quarter of each year as part of our company-wide employee performance evaluation.
Equity Award Grants in 2016 under the 2006 EIP
The Compensation Committee generally limits grants to our listed officers to no more than 5% of the total equity awards granted in any one year. Over the past three fiscal years, on average only 2.0% of all equity awards were granted to our listed officers.
Since 2015, we have granted equity awards under the 2006 EIP exclusively in the form of RSUs and OSUs. The employees in our broad-based equity award program receive RSUs. Our senior-level employees and non-employee directors receive OSUs in addition to RSUs, with our senior-level employees generally receiving a majority of their equity awards, by grant date fair value, in the form of OSUs. OSUs are subject to performance-based vesting. They are granted at a target share amount, and the amount of shares a participant ultimately receives upon vesting can range from 0% to 200% of the target, depending on Intel’s total stockholder return (TSR) relative to the average TSR of a comparison group of companies over a three-year performance period. For more information on OSUs, see “Executive Compensation; Grants of Plan-Based Awards in Fiscal Year 2016.”
We believe RSUs and OSUs are an effective means to align the interests of employees and stockholders, and OSUs provide our senior leadership with at-risk compensation that rewards out-performance. The number of shares issued under awards may be lower or, in the case of OSUs, higher than the nominal number of shares stated in the awards, but in no case may the limits set forth in the 2006 EIP be exceeded. Although we stopped granting stock options in 2015, we maintain flexibility under the 2006 EIP to grant stock options, as well as SARs and restricted stock, in the future.
NET BURN RATE, GROSS BURN RATE, AND OVERHANG
We review a number of metrics to assess the cumulative impact of our equity compensation program, particularly the following:
- Net Burn Rate. Our net burn rate is equal to our total equity awards granted less cancellations, divided by total shares of common stock outstanding at the end of the year. Net burn rate shows how rapidly the shares reserved for our 2006 EIP are being depleted, while reflecting that canceled awards are returned to the plan. Carefully monitoring our net burn rate helps us limit long-term stockholder dilution from our equity compensation program. Intel’s long-term goal is to limit the average net burn rate under our 2006 EIP to less than 2%. Over the past three fiscal years, annual net burn rate averaged 0.8% (0.9% in 2016).
- Gross Burn Rate. Gross burn rate is another measure of share utilization that differs from net burn rate by not taking into account award cancellations. It is equal to our total equity awards granted divided by total shares of common stock outstanding at the end of the year. Over the last three fiscal years, our annual gross burn rate has averaged 1.1% (1.1% in 2016).
- Overhang. Overhang measures potential stockholder dilution and is equal to the number of shares subject to our outstanding equity awards, plus the number of shares available to be granted, divided by total shares of common stock outstanding at the end of the year. Over the past three fiscal years, our overhang has averaged 8.6% (7.3% in 2016). If the amended and restated 2006 EIP is approved, our overhang would be 8.0%, or an additional 0.7%.
2006 EIP Key Metrics for the Past Three Fiscal Years
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information as of December 31, 2016 regarding equity compensation plans approved and not approved by stockholders (shares in millions).
1 The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs and OSUs, which have no exercise price.
2 Includes 110.3 million shares granted under the 2006 EIP that are issuable upon RSUs and OSUs vesting, including a maximum of 13.4 million shares that could be issued for outstanding OSUs. The remaining balance consists of outstanding stock option grants.
3 Includes 164.8 million shares authorized for issuance under the 2006 Stock Purchase Plan and 209.8 million shares authorized under the 2006 EIP, assuming shares will be issued at the maximum vesting amount for outstanding OSUs. If it is assumed that shares will be issued at the target vesting amount for outstanding OSUs, an additional 6.7 million shares would be included in the shares available for future issuance under the 2006 EIP, for a total of 216.5 million shares. This 216.5 million share number is the number reported in Note 19 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016.
4 3.8 million shares are issuable under outstanding options and RSUs that were originally granted under plans that we assumed in connection with acquisitions. The weighted-average exercise price of the assumed outstanding options is $16.78. No shares are available for future grants under these assumed plans.
KEY TERMS OF THE AMENDED AND RESTATED 2006 EQUITY INCENTIVE PLAN
The following is a summary of the key provisions of the amended and restated 2006 EIP, which is subject to stockholder approval of this Proposal. Some of these provisions are described in greater detail below, and the summary and descriptions are qualified by reference to the terms of the amended and restated 2006 EIP, which is set forth as Exhibit A to this proxy statement.
|Plan Term:||May 17, 2006 to June 30, 2020|
|Eligible Participants:||All of our full-time and part-time employees, where legally eligible to participate, and our non-employee directors.|
|Shares Authorized:||372.1 million shares may be issued following December 31, 2016, pursuant to either new grants after that date or awards outstanding as of that date, subject to adjustment only to reflect stock splits and similar changes in Intel’s capitalization.|
|Award Types (available to all eligible participants, including non-employee directors):||
|162(m) Share Limits:||The 2006 EIP limits the number of shares subject to awards granted to an individual participant in any calendar year to:
These limits are subject to adjustment to reflect stock splits and similar changes in Intel’s capitalization and are greater than the number of stock options or RSUs that we have granted to any individual in the past.
|Other Award Limitations:||No more than 100,000 shares may be subject to awards granted to a non-employee director in any fiscal year.|
|Vesting:||No stock option may be exercised less than one year from the grant date (except upon the death or disability, or retirement of the participant). For RSUs and restricted stock, no vesting condition that is based on performance criteria and level of achievement versus such criteria shall be based on performance over a period of less than one year.|
NON-EMPLOYEE DIRECTOR AWARDS
Each non-employee director may be granted awards for a number of shares, as determined by the Board, but the number of shares subject to such awards may not exceed 100,000 shares each fiscal year. This limit is subject to adjustment to reflect stock splits and similar changes in Intel’s capitalization.
Subject to the limits in the 2006 EIP, the Board has the discretion to determine the form and terms of awards to non-employee directors. The Board’s current practice is to grant each non-employee director a mix of RSUs and OSUs each January with a total target value of approximately $220,000.
VESTING OF RESTRICTED STOCK AND RSUS
The Compensation Committee (or, for non-employee director awards, the Board) may make the grant, issuance, retention, or vesting of restricted stock and RSUs contingent upon, among other conditions, continued employment with Intel, the passage of time, or such performance criteria and the level of achievement against such criteria as it deems appropriate.
VESTING AND EXERCISE OF STOCK OPTIONS AND SARS
The exercise price of stock options granted under the 2006 EIP may not be less than the market value (the average of the high and low market price) of our common stock on the grant date. The stock option term may not be longer than seven years in the case of stock options vesting in full in less than five years, and may not be longer than 10 years in the case of stock options vesting in full in five or more years. The Compensation Committee (or, for non-employee director awards, the Board) will determine when each stock option becomes exercisable, including the establishment of performance-vesting criteria, if any, provided that no stock option may be exercised less than one year from the grant date (except upon the death, disability, or retirement of the participant). Similar terms and limitations apply to SARs.
Unless specified by the Compensation Committee, the shares issuable under an award may not be adjusted to reflect cash dividends or other rights that may be paid or issued to stockholders prior to the issuance of those shares. The committee may specify that dividends or dividend equivalent amounts will be credited and/or payable with respect to the shares subject to an award, unless the award is a stock option or SAR. Furthermore, to the extent dividends or dividend equivalents are credited or payable in connection with an award, the dividends and dividend equivalents must be subject to the same restrictions and risk of forfeiture as the underlying award and may not be paid until the underlying award vests.
ELIGIBILITY UNDER SECTION 162(M) OF THE TAX CODE
Awards may, but need not, include performance criteria that are intended to satisfy Section 162(m) of the tax code. To the extent that awards are intended to qualify as “performance-based compensation” under Section 162(m) of the tax code, the performance criteria will be based on stock price appreciation (in the case of stock options or SARs) or on one or more of the following factors (in the case of RSUs and restricted stock), each of which may be adjusted as provided in the 2006 EIP:
- cash flow
- earnings per share
- earnings before one or more of interest, taxes, depreciation and amortization
- return on equity
- total stockholder return
- share price performance
- return on capital
- return on assets or net assets
- income or net income
- operating income or net operating income
- operating profit or net operating profit
- gross margin, operating margin or profit margin
- return on operating revenue
- return on invested capital
- market segment share
- product release schedules
- new product innovation
- product cost reduction through advanced technology
- brand recognition/acceptance
- product ship targets
- customer satisfaction
These factors may be applied either individually, alternatively, or in any combination, applied to either the company as a whole or to a business unit or subsidiary, either individually, alternatively, or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis, or relative to a pre-established target, to previous years’ results, or to a designated comparison group, on a U.S. generally accepted accounting principles (GAAP) or non-GAAP basis, in each case as specified by the Compensation Committee in the award.
The number of shares of common stock, stock options, or other benefits granted, issued, retainable, or vested under an award that is intended to satisfy Section 162(m) of the tax code upon satisfaction of performance criteria may be reduced by the committee based on any further considerations that the committee may determine in its sole discretion.
Awards granted under the 2006 EIP are transferable only by will or the laws of descent and distribution, or to the extent otherwise determined by the Compensation Committee. The committee has sole discretion to permit the transfer of an award.
The Compensation Committee, which is made up entirely of independent directors, administers the 2006 EIP. The 2006 EIP grants broad authority to the plan administrator to do all things necessary or desirable, in its sole discretion, in connection with the administration of the 2006 EIP. The committee will select the employees who receive awards; determine the number of shares covered thereby; and, subject to the terms and limitations expressly set forth in the 2006 EIP, establish the terms, conditions, and other provisions of the grants. The committee may interpret the 2006 EIP and establish, amend, and rescind any rules related to the 2006 EIP, and make remedial changes to the terms of an outstanding award to comply with applicable laws, regulations, and listing requirements and to avoid unintended consequences resulting from unexpected events.
The Compensation Committee may delegate to a committee of one or more officers the ability to grant awards and take other actions with respect to participants (other than such officers themselves) who are not directors or executive officers, provided that the Compensation Committee specifies limits on the number of awards that may be granted. The Compensation Committee has delegated authority to a committee consisting of the CEO and the Senior Vice President of Human Resources to grant awards to non-executive employees within limits and a budget pre-approved by the Compensation Committee. The Compensation Committee has also delegated administrative and ministerial functions under the 2006 EIP to the Senior Vice President of Human Resources.
CLAW-BACK PROVISION FOR EXECUTIVE OFFICERS
For any participant who is determined by the Board to be an “executive officer,” if the Compensation Committee determines that the participant engaged in an act of embezzlement, fraud, or breach of fiduciary duty during the participant’s employment that contributed to an obligation to restate Intel’s financial statements, the participant may be required to repay option proceeds and/or restricted stock proceeds resulting from any sale or other disposition of shares effected during the 12-month period following the first public issuance or filing with the SEC of the financial statements required to be restated. The term “option proceeds” means, with respect to any sale or other disposition of shares issued or issuable upon exercise of a stock option or SAR, an amount determined appropriate by the committee to reflect the effect of the restatement, up to the amount equal to the number of shares sold or disposed of, multiplied by the difference between the market value per share of Intel’s common stock at the time of such sale or disposition and the exercise price. The term “restricted stock proceeds” means, with respect to any sale or other disposition of shares issued or issuable upon vesting of restricted stock or an RSU, an amount determined appropriate by the committee to reflect the effect of the restatement, up to the amount equal to the market value per share of Intel’s common stock at the time of such sale or other disposition, multiplied by the number of shares or units sold or disposed of.
AMENDMENTS REQUIRING STOCKHOLDER APPROVAL
The Board may terminate, amend, or suspend the 2006 EIP, provided that stockholder approval is required for any amendment (except those described in “Adjustments” below) that would:
- increase the number of shares that may be issued under the 2006 EIP;
- extend the term of the 2006 EIP;
- change the class of persons eligible to participate in the 2006 EIP;
- grant stock options at less than the market value;
- reduce the price of an outstanding stock option or SAR;
- reprice, repurchase, or exchange underwater stock options or SARs; or
- otherwise implement any amendment required to be approved by stockholders under the NASDAQ rules.
In the event of a stock dividend, recapitalization, stock split, combination of shares, extraordinary dividend of cash or assets, reorganization, or exchange of our common stock, or any similar equity restructuring transaction (as that term is used in FASB ASC Topic 718) affecting our common stock, the Compensation Committee will equitably adjust: the number and kind of shares available for grant under the 2006 EIP; the number and kind of shares subject to the various limitations set forth in the 2006 EIP and subject to outstanding awards under the 2006 EIP; and the exercise or settlement price of outstanding stock options and of other awards.
The impact of a merger or other reorganization of Intel on outstanding awards under the 2006 EIP will be specified in the agreement related to the merger or reorganization, subject to the limitations and restrictions set forth in the 2006 EIP. Such agreement may provide for, among other things, assumption of outstanding awards, accelerated vesting or accelerated expiration of outstanding awards, or settlement of outstanding awards in cash.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The U.S. federal income tax rules applicable to awards under the 2006 EIP under the tax code are summarized below. This summary omits the tax laws of any municipality, state, or foreign country in which a participant resides. Generally, taxes are not due when a restricted stock or RSU award is initially granted, but the award becomes taxable when it is no longer subject to a “substantial risk of forfeiture” (generally, when it becomes vested or transferable), in the case of restricted stock, or when shares are issued in connection with vesting, in the case of an RSU. Income tax is calculated on the value of the stock at ordinary rates at that time, and then at capital gain rates when the shares are sold. However, no later than 30 days after a participant receives an award of restricted stock, pursuant to Section 83(b) of the tax code, the participant may elect to recognize taxable ordinary income in an amount equal to the fair market value of the stock at the time of receipt. Provided that the election is made in a timely manner, the participant will not recognize any additional income when the award is no longer transferable or subject to a “substantial risk of forfeiture.”
Stock option grants under the 2006 EIP may be intended to qualify as incentive stock options under Section 422 of the tax code or may be non-qualified stock options governed by Section 83 of the tax code. Generally, federal income tax is not due from a participant upon the grant of a stock option, and a deduction is not taken by the company. Under current tax laws, if a participant exercises a non-qualified stock option, he or she will have taxable income equal to the difference between the market price of the common stock on the exercise date and the stock option grant price. We are entitled to a corresponding deduction on our income tax return. A participant will not have any taxable income upon exercising an incentive stock option after the applicable holding periods have been satisfied (except that the alternative minimum tax may apply), and we will not receive a deduction when an incentive stock option is exercised.
The treatment of a disposition of shares acquired through the exercise of a stock option depends on how long the shares were held by the participant and whether the shares were acquired by exercising an incentive stock option or a non-qualified stock option. We may be entitled to a deduction in the case of a disposition of shares acquired under an incentive stock option before the applicable holding periods have been satisfied.
Section 409A of the tax code provides additional tax rules governing non-qualified deferred compensation. Generally, Section 409A will not apply to awards granted under the 2006 EIP, but may apply in some cases to RSUs, performance units, and performance shares. For such awards subject to Section 409A, certain officers of the company may experience a delay of up to six months in the settlement of the awards in shares of company stock.
Re-Approval of the 2006 Equity Incentive Plan for Purposes of Section 162(m) of the Tax Code. As described above, the 2006 EIP has been structured in such a manner that equity awards made under it can satisfy the requirements of “performance-based” compensation within the meaning of Section 162(m) of the tax code. In general, under Section 162(m) of the tax code, in order for Intel to be able to deduct compensation in excess of $1 million paid in any one year to our CEO or any of our other listed officers (other than our CFO or any officer who is not subject to U.S. income tax), such compensation must qualify as performance-based. One of the requirements of performance-based compensation for purposes of Section 162(m) of the tax code is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by stockholders. For purposes of Section 162(m) of the tax code, the material terms include the employees eligible to receive compensation, a description of the business criteria on which the performance goal is based, and the maximum amount of compensation that can be paid to an employee under the performance goal, which terms are discussed above in this Proposal 4. With respect to awards under the 2006 EIP, stockholder approval of the amendment and restatement of the 2006 EIP is also intended to qualify as re-approval of the material terms of the 2006 EIP for purposes of the approval requirements of Section 162(m) of the tax code. However, nothing in this proposal precludes us or the plan administrator from granting awards that do not qualify for tax deductibility under Section 162(m) of the tax code, nor is there any guarantee that awards intended to qualify for tax deductibility under Section 162(m) of the tax code will ultimately be viewed as so qualifying by the IRS.
NEW PLAN BENEFITS; MARKET VALUE OF SECURITIES
The Compensation Committee has the discretion to grant awards under the 2006 EIP, and the committee has not determined future awards or who might receive them. Accordingly, the benefits that will be granted or paid under the amended and restated 2006 EIP cannot currently be determined. As of March 20, 2017, the closing price of a share of Intel common stock was $35.43.
PRIOR STOCK OPTION GRANTS UNDER THE 2006 EIP
Pursuant to SEC rules, the following table sets forth the number of shares subject to stock options granted under the 2006 EIP from May 17, 2006 (when the 2006 EIP was initially approved by stockholders) through December 31, 2016.
1 These share numbers do not include shares underlying options that were granted but were subsequently canceled or expired unexercised.
RECOMMENDATION OF THE BOARD
The Board of Directors recommends that you vote “FOR” amendment and restatement of the 2006 Equity Incentive Plan.
Proposal 5: Advisory Vote on the Frequency of Holding Future Advisory Votes to Approve Executive Compensation
The federal law that requires each U.S. public company to hold a “say on pay” advisory vote also requires that stockholders be asked to vote on the frequency of “say on pay” votes. Pursuant to this law, which is set forth in Section 14A of the Securities Exchange Act of 1934, as amended, we are asking stockholders to vote on whether future “say on pay” votes such as the one in Proposal 3 above should occur every year, every two years, or every three years. This vote on the frequency of “say on pay” votes is advisory in nature and must be held at least once every six years. Intel has voluntarily conducted annual “say on pay” votes every year since 2009, two years before required by federal law, but we welcome the opportunity to submit the three alternative frequencies to our stockholders for consideration. Some commentators have said that a two-year or three-year frequency might be better aligned with compensation trends or programs and would place less emphasis on the results or actions of a single year; other commentators have stated that an annual vote provides a company with more opportunity for timely feedback. We are prepared to operate under any of the three alternative frequencies and look forward to the stockholder vote for input, although the Board recommends that stockholders vote to continue to hold “say-on-pay” votes every “one year.” Stockholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years, or abstain. This advisory vote is non-binding on the Board, but the Board will give careful consideration to the voting results on this proposal and expects to be guided by the alternative that receives the greatest number of votes, even if that alternative does not receive a majority of the votes cast.
RECOMMENDATION OF THE BOARD
The Board of Directors recommends that you vote to conduct future advisory votes to approve executive compensation every “One Year.”